Russia unlikely to stop trans-Balkan pipeline transit in 2020, sources

Source: Heren

2019/03/14

LONDON (ICIS)--Russia is unlikely to stop the transit of natural gas to Turkey via Ukraine from 2020 as much would depend on its negotiations with Ankara for the new TurkStream pipelines and technical issues related to the ramp-up period, regional sources told ICIS.

The comments came after the Bulgarian energy minister said this week local officials received a letter from Gazprom Export, notifying them of their intention to stop the existing transit via the Trans-Balkan pipeline (TBP), which crosses Ukraine, Romania and Bulgaria before entering Turkey. The pipeline also serves Bulgaria, Greece and the Republic of Northern Macedonia.

Gazprom currently plans to divert volumes exported via this route to TurkStream 1 and 2 which will link Russia to Turkey via the Black Sea. The two lines with a capacity of 15.75 billion cubic metres (bcm)/year each are due to be commissioned in 2020. TurkStream 1 will feed exclusively the Turkish market, while TurkStream 2 will link up with the Bulgarian system at the existing Malkoclar-Strandja entry point on the Turkish-Bulgarian border.

Ramp-up period

However, regional sources said it was unlikely that flows via TBP would be completely discontinued from 2020, pointing out that there would have to be a ramp-up period on TurkStream 1 and 2 until volumes are brought close to their nameplate levels.

“This is nothing new,” said Ilian Vassilev, former Bulgarian ambassador to Russia and a gas market expert. “I wonder whether the content of the letter qualifies for formal notice under the terms of the transit contract, or whether this is a general advice referring to Ukraine? The reason being is that there is no mention of what happens to transit to Greece and North Macedonia.”

Turkish negotiations

Another source close to discussions pointed out that Turkish gas importing companies including the state incumbent BOTAS and independents were in negotiations with Gazprom over the extension of existing contracts as well as the terms of the new agreements.

The import contracts for BOTAS and four independent companies – Enerco Enerji, Bosphorus Gaz, AVRASYA GAZ and Shell – will expire in 2021.

“All these companies may be asking for better terms related to take-or-pay, price, as well as technical issues such as control over the metering stations and pressure measurements for TurkStream,” the source said.

“Turkey is now in a much better position to negotiate. Its LNG import capacity is 42bcm and its annual demand is around 52bcm. This winter Turkey has hardly imported any Russian gas from Malkoclar [the TBP], which shows that its dependence on Russia has decreased.”

Bulgarian transit

Gazprom however has been making progress in booking transit capacity via Bulgaria and Serbia into Hungary and the Bulgarian transmission system operator Bulgartransgaz is tendering for a 484km pipeline that would link the eastern part of the domestic grid to the Serbian border.

Speaking about the tender, Temenuzhka Petkova, the Bulgarian energy minister, said the grid operator had received offers from three consortia made up of Italian, Austrian, Hungarian and Saudi Arabian companies.

“We can’t see if there are any Russian subcontractors among them. We’ll know next week,” she said.

She explained the pipeline would be financed by Bulgartransgaz at a cost of Bulgarian leva 2.2bn (€1.2bn), adding that there would be additional costs for the construction of compressor stations. This means the overall cost for the project would rise to Bulgarian leva 2.7bn.

“Our analysis shows that Bulgaria will make a Bulgarian leva 400m annual profit from the transit of Turkstream gas,” she said.